Experienced market participants warn of dangers posed by crypto assets to traditional capital markets

According to market veterans discussing at the SEBI-NISM Research Conference on March 13, the regulation and legitimization of cryptocurrencies in developed markets has had an impact on their capital markets.

During the discussion, experts emphasized the challenge of educating Indian investors about the risks associated with investing in cryptocurrencies.

Veteran banker Uday Kotak mentioned that developed nations like the US, UK, and Europe are recognizing cryptocurrencies as a hedge, with bitcoin’s performance doubling or tripling in the last year.

He expressed concern that the legitimizing of cryptocurrencies in developed economies is diverting significant investor savings away from traditional capital formation.

Ashish Chauhan, the MD & CEO of BSE, compared equity markets with cryptocurrencies, highlighting the difference in profit promise between the two asset classes.

Nilesh Shah, MD and CEO of Kotak Mahindra Asset Management Company, raised concerns about individuals trading cryptocurrencies without fully understanding the asset and urged for investor education.

Shah also pointed out that a significant percentage of bitcoins or cryptos are inaccessible to their owners, citing a case of an investor losing half a billion dollars due to a forgotten password.

He called for regulatory policies around cryptocurrencies that would attract global savings to India.

SEC Chairperson Madhabi Puri Buch also stressed the importance of instantaneous settlement in regulated securities markets to compete with the liquidity and convenience offered by cryptocurrencies.

She warned that if regulated markets do not adapt, funds may flow towards crypto assets that offer advantages such as anonymity and immediate settlement.

Cryptocurrencies are digital assets created by decentralized networks, operating outside government control. As of 1:00 PM, Bitcoin was trading at $72,828, having gained over 200 percent in the last year.

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